The enactment of Republic Act No. 11595, also known as the Act Amending the Retail Trade Liberalization Act of 2000, marks a significant milestone in the Philippines’ efforts to attract foreign investment and revitalize its retail trade sector. Signed into law on December 10, 2021, and becoming effective on January 21, 2022, RA 11595 introduces key amendments to the original Retail Trade Liberalization Act (Republic Act No. 8762), making the country more competitive in the global market by easing entry for foreign retailers and encouraging increased investment.
A Comparison: RA 8762 “Retail Trade Liberalization Act” vs. RA 11595
Under RA 8762, foreign retailers faced several barriers that made entering the Philippine retail market challenging. These included a high minimum paid-up capital requirement of USD 2.5 million for foreign retailers and restrictive prequalification requirements. These stringent measures, while intended to protect local businesses, inadvertently discouraged foreign investments and limited consumer access to diverse goods and services.
RA 11595 addresses these issues and lowers the barriers for foreign entities, making the Philippine retail trade more accessible. Key changes include:
- Reduction in the Minimum Paid-Up Capital
The minimum paid-up capital for foreign retailers was significantly reduced from USD 2.5 million to PHP 25 million or approximately USD 450,000. This change opens doors for medium-scale foreign retailers who may have been previously deterred by the prohibitive capital threshold.
The minimum paid-up capital requirement however, is subject to review of the Department of Trade and Industry, Securities and Exchange Commission, and the National Economic and Development Authority every three years. - Lower Minimum Investment Requirement per Store
Under RA 8762, the minimum investment for establishing a store was set at USD 830,000.00 or approximately PHP 48.5 million.
Now, under Section 5 (c) of R.A. 11595, the minimum investment per store for foreign retailers operating more than one physical store is significantly reduced to at least PHP 10 million or approximately USD 170,000.00 only.
This reduction makes it more financially feasible for foreign retailers to expand their operations in the Philippines. - Streamlined Pre-Entry Requirements
Through the deletion of Section 8 of RA 8762, RA 11595 removes several prequalification requirements that were previously seen as overly burdensome and investment-stifling, such as:- A minimum net worth of USD 200 million in the parent corporation or USD 50 Million in the parent corporation of enterprises specializing in high-end or luxury products;
- Proof of a five-year track record in retail operations; and
- Evidence of having at least five retailing branches or franchises in operation worldwide.
The removal of these restrictions streamlines the process and makes it significantly easier for foreign retailers to establish operations in the Philippines.
Why RA 11595 is Better for Investors
RA 11595 exemplifies the Philippine government’s commitment to liberalizing its economy and creating a more investor-friendly environment. By lowering the minimum paid-up capital, reducing compliance requirements, and streamlining entry procedures, foreign retailers can now enter the Philippine market with greater ease and reduced financial risk.
How ABO Law Firm Can Help
At ABO Law Firm, we specialize in assisting foreign companies with the complexities of Philippine investment laws, including the implementation of RA 11595. Our team provides comprehensive legal solutions, from securing permits and completing compliance requirements to drafting contracts and facilitating partnerships with Filipino investors and business owners.
We also offer services for business registration and end-to-end support to ensure a smooth and compliant entry into the Philippine retail market. Contact us today to unlock the opportunities presented by RA 11595 and take the first step towards expanding your business in the Philippines.
